energies

Article
The Influence of Small-Scale Power Plant Supporting
Schemes on the Public Trader and Consumers †
Renata Varfolomejeva 1, *, Antans Sauhats 1 , Nikita Sokolovs 1 and Hasan Coban 2
1 Institute of Power Engineering, Riga Technical University, Azenes Str. 12/1, LV-1069 Riga, Latvia;
sauhatas@eef.rtu.lv (A.S.); Nikita.Sokolovs@latvenergo.lv (N.S.)
2 Mmeka Construction and Industry Trade Inc. Orucreis Mah. Tekstilkent Koza Plaza. A Blok. Kat 12. No.:46,
Esenler, 34220 Istanbul, Turkey; hasan.coban@rtu.lv
* Correspondence: renata.varfolomejeva@rtu.lv; Tel.: +371-28-327-635
† This paper is an extended version of our paper published in Proceedings of the 2016 IEEE 16th International
Conference on Environment and Electrical Engineering (EEEIC), Firenze, Italy, 7–10 June 2016.

Academic Editor: Rodolfo Araneo

Received: 13 February 2017; Accepted: 6 June 2017; Published: 12 June 2017

Abstract: The mechanism of support schemes for achieving the required share of renewable energy
sources (RES) was implemented into the energy sector. The issued amount of support requires state
subsidies. The end-users of electricity are paying the mandatory procurement component taxes
to cover these subsidies. The article examines the way of minimizing the influence of the existing
RES supporting schemes on the consumers. The fixed purchased electricity price in the case of RES
does not encourage producers to operate at hours of peak consumption or when the price is high.
Modification of the RES support mechanisms at the legislative level, firstly, could minimize the
influence of the mandatory procurement component on the end-users’ electricity price, and secondly,
could provide a great opportunity for the public trader to forecast the operation of small power
plants and their generation abilities. Numerical experiments with models of two types of power
plants (biofuel and hydropower) prove the existence of a problem and the presence of a solution.
This problem constitutes the main subject of the present paper.

Keywords: energy supply; biofuel; hydropower; supporting schemes; optimization; mandatory

procurement

1. Introduction
In the development of the power industry, the modern community is striving to achieve four
main goals [1–3]: increasing of efficiency; increasing of the reliability level; decreasing of the harmful
environmental impact and climate change; ensuring of sustainability.
To improve the efficiency of energy supply, power systems have been restructured and
a competitive electricity market has been created. The traditional centralised management of the
sector is being superseded by management that is based on adequate reflection of the price signals of
the market subjects. The task of ensuring reliability is entrusted to operators of transmission networks.
To reduce the impact of the energy sector on climate change and to ensure the conditions for its
sustainability, ambitious renewable energy development programs have been adopted [4–6].
Looking beyond 2020 and striving to implement the above-mentioned programs, the European
Commission has developed a network of renewable energy sources (RES) supporting schemes [7].
After several years of working with RES supporting schemes, the Commission has recognized the
need for a more harmonized approach to RES support in the European Union (EU) [4]. In this article,
an attempt is made to justify the necessary changes in the rules of support of renewable energy
sources. To do this, an analysis of existing support mechanisms, identification of their deficiencies

Energies 2017, 10, 800; doi:10.3390/en10060800 www.mdpi.com/journal/energies

Energies 2017, 10, 800 2 of 12

and a search for ways to eliminate them was made. As a result, we justified the solution suitable for
small power plants, which are forced to operate at the conditions of limited primary energy resources.
When resources are limited, the power plant operator can select the hours of operation or non-operation.
The hydroelectric (HPP) and biofuel cogeneration power plants (CHPP) can be attributed to this type
of plant [8]. A HPP is operating at the conditions of limited water inflow. CHPP often use primary
resources that are a by-product of urban activities (waste processing for example), agricultural or
industrial production, the volume of which is limited and subject to seasonal fluctuations. Over the
past decade, there has been a steady and intensive growth in the number of such power plants [9].
Europe is the leader in energy production from biomass as almost 18 GW capacity is installed [10].
The effective operation of small power plants could solve tasks related to the regulation, planning
and balancing of the system. An advanced supporting scheme can increase the effectiveness of
using the state subsidies and the optimal distribution of the energy resources. The papers [4–7] have
discussed the various aspects of selecting a support scheme for RES according to the importance
of energy generation in the region and its capacity selection. The authors of [4] have collected data
about the existing RES supporting schemes, breaking them up into policy objectives; according to the
design element, the decision tree method has been implemented in order to understand exactly how
relevant each type of support of RES is and which of them should be harmonized on the EU level.
Almost the same as in [4] is analyzed in [6], discussing an appropriate instrument of solutions that can
be implemented for RES. As the most important aspect, the authors of [5] single out the timing barrier
of RES and the uncertainty regarding future targets. Here, the value of RES credits is stressed, as well
as its effect on the prices for the consumers of 2020. In [7], the interaction of the European Emissions
Trading Scheme (ETS) and national RES policies has been analyzed; the ETS proposes more rigorous
rules for the supports to achieve more effective distribution of support.
The most common scheme for supporting RES is feed-in tariff [4], according to which the producer
is paid a guaranteed price for electricity. It is obvious that with such a support scheme the manufacturer
is not interested in generating power during the hours of its maximum demand. This is the main
drawback of this scheme. Improvement of existing RES supporting schemes can reduce balancing costs
in the peak hours. In this article, it is this task that we are striving to solve. The feed-in premium tariff
described in [11] solves this problem, but not for the existing plants, to which feed-in tariff support
subsidies were assigned before. Suggesting changes in the support mechanisms, one should see the
impossibility of reducing payments to already operating (and licensed) power plants because it is
impossible to revoke a license that has already been issued. From this, a task arises—to change the
rules without breaking the law. To solve this problem, we propose a revision of the existing supporting
schemes through the development of cooperation between the public trader and the RES operator at
liberalized market conditions. In this case, after operational mode adjustment according to market
prices, an additional income can be received. To further support the RES operator, cooperative game
theory should be used (Shapley value [12–14]), which prescribes an equitable distribution from the
additional profits generated by joint efforts of the members of the coalition.
The results show that the proposed approach reduces the necessary support, thereby reducing the
tariff to the consumer and providing additional income for the plant. To the RES operators it means
planning their generation during the day in such a way as to ensure reduction or increase of generation
in accordance with the needs of the entire power system [15]. The above-described methodology can
be considered the main contribution of the paper.
The second contribution is related to numerical experiments with models of biofuel and
hydropower plants considering all the environmental and technical limitations. The ability of the
producers to adjust the operational mode to the market price schedule proves the existence of
drawbacks in the existing supporting scheme and the need to reconsider it.
The structure of the remaining part of the paper is as follows: Section 2 represents the topicality of
the existing problem regarding the support of renewable generation; Section 3 represents a statement
Energies 2017, 10, 800 3 of 12

Energies
of the 2017, 10,
problem and800the structure of the developed algorithm; Section 4 describes the results of the
3 of 13
case
study; and Section 5 concludes the paper.
statement of the problem and the structure of the developed algorithm; Section 4 describes the
results ofofthe
2. Support case study;Generation
Renewable and Section 5 concludes the paper.

2.The rightofofRenewable
Support the electricity producer using renewable energy sources to sell all the produced
Generation
electricity at a guaranteed purchase price exists in all the European countries. The energy market
The right of the electricity producer using renewable energy sources to sell all the produced
competitiveness rules prescribe that all the power generated from RES should be sold to the public
electricity at a guaranteed purchase price exists in all the European countries. The energy market
trader (which leads its activities in the interests of the consumers) at a guaranteed purchase price.
competitiveness rules prescribe that all the power generated from RES should be sold to the public
Every day,(which
trader the public
leadstrader sells and
its activities buys
in the energyof
interests atthe
theconsumers)
hourly market at a price; the difference
guaranteed purchasebetween
price.
the Every
guaranteed and market prices is covered by the electricity consumers.
day, the public trader sells and buys energy at the hourly market price; the difference betweenThe guaranteed purchase
price
thedoes not encourage
guaranteed and market the producer to choose
prices is covered theelectricity
by the operatingconsumers.
mode according to the market
The guaranteed purchase price
because
price RES
doespower plants are
not encourage themaximizing
producer to the amount
choose of generated
the operating modeenergy
accordingto receive higher price
to the market profits.
Thebecause
absenceRES of coordination
power plants of arepower plant the
maximizing operation
amountaccording
of generated to the electricity
energy to receivemarket
higher price is the
profits.
mainThedrawback
absence of of coordination
the support schemeof power[4]. Theoperation
plant producers of electricity
according to thefrom RES do
electricity not suffer
market pricefrom
is thethe
main
price drawbacksince
fluctuations of thethey
support scheme
receive from[4].
the The producers
public trader,ofon electricity
an hourly from RES the
basis, do notsame suffer from
purchased
the price
electricity fluctuations
price. The important since aspect
they receive fromkind
is that such the of public trader,will
regulation on not
an affect
hourlythe basis,
incomethe received
same
purchased
by the producer electricity
but, on the price.
otherThehand,
important
it willaspect is that
affect the such kind
reduction of regulation
of the will not affect
difference between the
the trading
income received by the producer but, on the other hand, it will affect
prices, thus reducing the mandatory procurement component (MPC) or leaving it at the same level. the reduction of the difference
Thebetween
operation theoftrading prices, plants
such power thus reducing the mandatory
at the operators’ own procurement component
discretion affects not only (MPC) or leaving of
the operation
it at the same level. The operation of such power plants at the operators’ own discretion affects not
the whole power system but also the individual plants because, as a result, they do not receive optimal
only the operation of the whole power system but also the individual plants because, as a result, they
operational control and distribution of the energy resources.
do not receive optimal operational control and distribution of the energy resources.
The scope of support can be divided into different types: feed-in tariffs (FIT), feed-in premiums
The scope of support can be divided into different types: feed-in tariffs (FIT), feed-in premiums
(FIP), green certificates, etc. [2,3]. The total value of the support issued for RES dictates the value of
(FIP), green certificates, etc. [2,3]. The total value of the support issued for RES dictates the value of
the the
MPC. MPC. Almost
Almost every
every country
countryininthe theEUEUhashasits
its own
own supporting approachestotoRES.
supporting approaches RES. InIn
ourour article,
article,
the the
support
support schemes
schemes and andtheir
theirinfluence
influencewill will be
be examined
examined on on the
thebasis
basisofofthetheexample
example of of Latvia;
Latvia;
however,
however, the results provided in this study could be useful for any supported power plant. Latviahas
the results provided in this study could be useful for any supported power plant. Latvia
the has
fourth
the highest MPC payment
fourth highest MPC payment in theinEU theand the non-competitive
EU and the non-competitive situation
situation is is
still
stillintensifying
intensifyingfor
the for
largetheelectricity consumers.
large electricity The total
consumers. Theamount of the of
total amount existing support
the existing (in Latvia)
support aboveabove
(in Latvia) the market
the
price in millions
market € in 2015
price inofmillions of €was 254.9.
in 2015 wasThe distribution
254.9. The distributionof theof MPC among
the MPC the recipients
among the recipientsin 2015
in
2015 is presented
is presented in Figurein1Figure
[16]. The1 [16]. The mandatory
mandatory procurement
procurement from RES fromincluding
RES including
biogas biogas
power power
plants,
plants,power
biomass biomass power
plants, plants,
wind powerwindplants
powerand plants and hydropower
small small hydropower plantsplants equaled
equaled 37.1% 37.1% of the
of the total
total support
support amount amount
in 2015. in 2015.
The The mandatory
mandatory procurement
procurement from thefrom the fossil-fueled
fossil-fueled combined
combined heat heat and
and power
power
plants plants
equaled equaled
18.6% of the 18.6%
total of the total
support support
amount amount
in 2015, in 2015,
whereas the whereas
capacity the capacity
payment payment
(RES) equaled
(RES) equaled only 2.0%. The capacity payment for the fossil-fueled
only 2.0%. The capacity payment for the fossil-fueled combined heat and power plants equaled combined heat and power
42.3%
plants
of the totalequaled
support 42.3%
amount of the
intotal
2015support
[16]. amount in 2015 [16].

Support amount above market price in millions of EUR in 2015

Biogas power plants

Biomass power plants

50.4
Wind power plants

107.8 Small HPPs

28.6
Mandatory procurement from fossil-fuelled combined
6.4 heat and power plants
9 Capacity payment (RES)
5.2 47.5
Capacity payment (fossil-fuelled combined heat and
power plants)

Figure
Figure 1. Mandatory
1. Mandatory procurement
procurement component
component in 2015
in 2015 [16]. HPP:[16]. HPP: hydroelectric
hydroelectric power plant;power plant;
RES: renewable
RES:sources.
energy renewable energy sources.
Energies 2017, 10, 800 4 of 12
Energies 2017, 10, 800 4 of 13

The
The total
total support
support to to renewable energy, given
renewable energy, given the
the small
small dimensions
dimensions of of the
the country,
country, should
should bebe
recognized
recognized as very significant. An indirect confirmation of that can be seen in the rapid increase in
as very significant. An indirect confirmation of that can be seen in the rapid increase in
the
the number
number of of new
new small
small power
power plants [1]. Unfortunately,
plants [1]. Unfortunately, the the considered
considered process
process directly
directly affects
affects the
the
electricity
electricity tariff.
tariff. The
The total
total price
price ofof the
the consumed
consumed electricity
electricity for
for the
the end-user
end-user isis formed
formed by by aa number
number of of
significant factors and the final tariff consists of the following: the electricity trade
significant factors and the final tariff consists of the following: the electricity trade price, €/kWh [1]; price, €/kWh [1];
the
the tariff
tariff for
for the
the services
services of of the
the distribution system, €/kWh;
distribution system, €/kWh; thethe tariff
tariff for
for the
the mandatory
mandatory procurement
procurement
component €/kWh the value-added tax, €/kWh—traditionally,
component (MPC), €/kWh[1,17]; the value-added tax, €/kWh—traditionally, the most significant
(MPC), [1,17]; the most significant
component
component in in this
this cost
cost category
category consists
consists inin the
the value-added
value-added tax tax (VAT)
(VAT) as as well
well as
as the
the electric
electric energy
energy
and emissions taxes
and emissions taxes [1]. [1].
Within
Within the thesupport
support to to
thethe
environment-friendly
environment-friendly producers
producersit is necessary to significantly
it is necessary increase
to significantly
the electricity
increase price. The
the electricity income
price. Theofincome
the supported energy producers
of the supported who receive
energy producers whosupport
receivefrom the
support
government is not affected by the hourly market prices. As a result, energy
from the government is not affected by the hourly market prices. As a result, energy is produced at is produced at the hours
when the price
the hours whenisthelowprice
and at is periods
low andofatlow demand,
periods instead
of low of periods
demand, instead when the prices
of periods whenare the
highprices
or at
peak hours.
are high This
or at peakfact affects
hours. notfact
This onlyaffects
the operation
not onlyof thethe whole power
operation of thesystem
whole but
poweralsosystem
the individual
but also
plants,
the individual plants, because, consequently, they do not receive optimal operational controlofand
because, consequently, they do not receive optimal operational control and distribution the
energy resources
distribution of the(Figure
energy2). resources (Figure 2).

Electricity CHPPs Electricity HPPs

price, capacity, price, capacity,
70 8
70 €/MWh MW 180 €/MWh MW
60 7.5
60
170 50
50 7
40 160 40
6.5
30 30
150
Nord Pool Spot 6
20 20
140 Nord Pool Spot
10 Small CHPP 10 5.5
Small HPP
0 hour 130 0 hour 5
144 156 168 180 192 204 216 228 240 144 156 168 180 192 204 216 228 240

(a) (b)
Figure 2.
Figure 2. An
An example
example of
of summary
summary electricity
electricity production
production (a)
(a) small
small combined
combined heat
heat and
and power
power plants
plants
and (b) small hydropower plants in Latvia.
and (b) small hydropower plants in Latvia.

Figure 2 shows a schedule of electricity generation by a group of small HPPs and CHPPs with a
Figure 2 shows a schedule of electricity generation by a group of small HPPs and CHPPs with
total capacity of 9.2 MW and 175 MW, respectively, for the year 2015. An analysis of the processes of
a total capacity of 9.2 MW and 175 MW, respectively, for the year 2015. An analysis of the processes
change in the prices and the amount of generated energy enables a conclusion about insufficient
of change in the prices and the amount of generated energy enables a conclusion about insufficient
co-ordination of the observed processes.
co-ordination of the observed processes.
3. Task Statement
3. Task Statement
Three formulations of the task of optimizing the operating mode of power plants are possible:
Three formulations of the task of optimizing the operating mode of power plants are possible:
1. The problem of optimization under operating conditions at a fixed price of the generated
1. The problem of optimization under operating conditions at a fixed price of the generated energy.
energy.
2. Using market prices as the main signal that influences the schedule of generated energy.
2. Using market prices as the main signal that influences the schedule of generated energy.
3. Optimization
3. Optimization at at the
the conditions
conditions of
of forming
forming aa coalition,
coalition, which
which includes
includes the
the operator
operator ofof aa power
power
plant and an electricity trader. We assume that the trader represents the interests of society.
plant and an electricity trader. We assume that the trader represents the interests of society.
The
The first
firstproblem
problemformulation
formulation supposes
supposesthatthat
thethe
price is fixed
price (RES(RES
is fixed are supported by theby
are supported feed-in tariff).
the feed-in
In this case,
tariff). thecase,
In this producer strives to strives
the producer maximize profit R byprofit
to maximize choosing R by the amount the
choosing of generated
amount ofenergy; thus:
generated
energy; thus:
Profit
 Profit
 
z }| {
N T
R T Pi t* = ∑ ∑
 t∗ N T
cs · Pi t − t t


{ }  ( )
E ( Pi ) ⇒ max, (1)
(1)
RT Pi = i=1 t=1 cs ⋅ Pi t − iEit (Pi t )  max ,
i =1 t =1
Energies 2017, 10, 800 5 of 12

Subject to the inequalities: regarding the limits of capacity of the i-th unit over every t-th hour,
MW: Pi ≤ Pit ≤ Pi , regarding the summary used energy resource limitation (for example, at a CHPP it is
biofuel, whereas at a SHPP it is the amount of water used in the reservoir over the whole day period, m3 ):
N T
∑ ∑ lit ≤ L T ; where cs , the fixed electricity price, €/MWh; ct , the electricity market price over
i =1 t =1
every t-th hour, €/MWh; Pi t , the energy generated by the i-th unit over every t-th hour, MWh; Pi , Pi ,
the maximum/ minimum capacity limits of the i-th unit, MW; Pit∗ , Pit∗∗ , the energy produced that
corresponds to the maximal revenue, MWh; Eit ( Pi t ), the energy production cost function, €/h; lit ,
the amount of energy resource used over hour t, m3 /h; L T , the amount of the energy resource available
for use during the optimization period T (it can be expressed in m3 of bio fuel or water). It is assumed
that the producer has N production units, and those are using the same energy resource.
The energy is generated by the schedule chosen using (1); the trader sells it on the market,
receiving income MT1 :
N T
MT1 = ∑ ∑ ct · Pit∗ , (2)
i =1 t =1

however, the power plant is paid a different amount MT2 , which is calculated using the guaranteed prices:
N T
MT2 = ∑ ∑ cs · Pit∗ ; (3)
i =1 t =1

as a rule, MT2 > MT1 . The difference between incomes ∆MT such as: ∆MT = MT2 cs , Pit∗ − MT1 ct , Pit∗

is paid by the community.

If the second problem formulation is used, the objective function is formulated striving to
maximize the profit R e T received by the power plant from selling the energy at the market price
together with the consideration of the constraints as in (1):
Expected profit
z }| {
N T
t∗∗
∑∑ Pi t · ct − Eit ( Pi t )


R
eT P
i = ⇒ max, (4)
i =1 t =1

The energy generated by the schedule chosen using (1) is sold by the trader on the market,
receiving income MT3 :
N T
MT3 = ∑ ∑ ct · Pit∗∗ ; (5)
i =1 t =1

as a rule, MT3 > MT1 .

It has to be pointed out that when selecting the operating mode according to (4), the amount of
generated energy may somewhat diminish. However, in this case the energy will be sold at the
hours when the prices are higher and, hence, the public trader will receive additional income:
∆MT add = MT3 − MT1 , which can be distributed among the public trader and the producers or
can be used to repay the state’s RES subsidies and reduce the MPC.
Unfortunately, according to the mandatory procurement conditions, all the energy generated
from RES is purchased by the public trader at a fixed price cs . It means that the power plant, regardless
of the operating mode, which has been selected according to the market price, will receive revenue
calculated according to the fixed price. As a result, the energy producer is not interested in choosing
such a regime because it can reduce its profit. In addition, power plant control in the second case is
more complicated. In order to change the situation and make the power generator interested in the
operating mode, taking into account the market price, the public trader must share with him part of
the additional profit. This is possible if a coalition (the third formulation of the optimization problem)
is created that establishes a contractual relationship between the trader and the producer. In this
case, transition from the first regulatory regime to the second one is possible and ensures an increase
in revenue that must be distributed between the trader and the producer. The new task of a fair
 second case is more complicated. In order to change the situation and make the power generator
interested in the operating mode, taking into account the market price, the public trader must share
with him part of the additional profit. This is possible if a coalition (the third formulation of the
optimization problem) is created that establishes a contractual relationship between the trader and
Energies
the 2017, 10, 800 In this case, transition from the first regulatory regime to the second one is possible
producer. 6 of 12
and ensures an increase in revenue that must be distributed between the trader and the producer.
The new task of a fair distribution of additional profits arises. The Shapley value is one way to
distribution of additional profits arises. The Shapley value is one way to distribute the total gains to
distribute the total gains to the players, assuming that they all collaborate [12–14]. In this paper, the
thedescription
players, assuming
of powerthat theyrelations
system all collaborate
between [12–14].
a public Intrader
this paper,
and a thepowerdescription of power system
plant is considered. The
relations between a public trader and a power plant is considered. The public
public trader is purchasing all the energy produced from RES. The contribution of the power plant to trader is purchasing
all the
the energy
receptionproduced from RES.
of additional profitThe is contribution
only possibleofin thea power plant
coalition withto the
the reception of additional
public trader and is
profit
independent of the participation or non-participation of other power plants in the coalition. Thus,or
is only possible in a coalition with the public trader and is independent of the participation
non-participation
the game includes of other
only twopower plants
players andinthe
theShapley
coalition. Thus, thevalue
distribution (v1) and only
gameSincludes S(v 2two
) forplayers
both
andplayers
the Shapley distribution value S ( v1 ) and S
in that coalition leads to the very simple equation:( v2 ) for both players in that coalition leads to the very
simple equation:
( )
N T

ΔM T add i ∑ cct⋅ ·PitP**t∗∗

N T t
− Pit* t∗

∑ − Pi (6)
S(v1) = S(v2 ) =∆M T add = i=1 t=1 =1 t =1 i
S(v1) = S(v2) = 2 = 2 (6)
2 2
Therefore,
Therefore, thethe additional
additional income
income fromfrom establishing
establishing the coalition
the coalition has tohasbe to beinsplit
split half.inWehalf. We
suppose
suppose that the public trader represents the community’s interests; as
that the public trader represents the community’s interests; as a result, some part of the additional a result, some part of the
additional income is aimed at reducing the mandatory
income is aimed at reducing the mandatory procurement components. procurement components.
A simplified
A simplified structure
structure ofof thepower
the powerplantplantoptimization
optimization process
process is is presented
presentedin inFigure
Figure3.3.

Figure AAsimplified
3. 3.
Figure simplifiedstructure
structureof
ofthe
the power
power plant optimization
optimizationprocess.
process.

Currently, the management of small power plants is largely autonomous and does not require
the use of highly qualified personnel and complex software tools. The optimization model of power
plant operation according to market prices will complicate the personnel’s work. To resolve this issue,
we can use the services of a special company (aggregator), which serves many power plants and can
generate the station’s operation mode online.
The optimization objectives, the structure of the power plant and the characteristics of fuel dictate
the specific task statement. The first factor to be considered for choosing the formulation of the problem
Energies 2017, 10, 800 7 of 12

is the time range. This time range can vary widely. In generation schedules, planning time can vary
from 24 h to 2 weeks or even longer (for example, the operation of a biogas power plant should be
determined for a planning horizon within one week (T = 168 h) or a longer period, since the process
of biogas production from raw materials should be considered). In tasks of estimating the economic
efficiency of a power plant, selecting the structure and power of equipment, the planning time may
reach the values of several decades of planning. In such cases, the above-mentioned expressions can
serve as a basis for evaluating economic indicators, for example, net present value (NPV) or internal
rate of return (IRR) [15]. The second factor that influences the formulation of the task consists in
uncertain variables such as: water inflow, ambient temperature, wind, etc. The uncertainty renders
our task stochastic. The third factor that should be considered is the subtask of maximization of the
objective functions taking into account the technological and environmental limitations.
The task solution starts from the prediction of the random processes (a forecast of the water
inflows, the market prices and the heat demand). A significant number of publications have been
devoted to the solution of prediction and optimization issues [18–20]; a detailed description of the
procedures used in the present article is beyond its scope. The volatility and uncertainty of the
electricity price is widely discussed in [19]. Prediction can be performed using an artificial neural
network. The algorithm and procedures used have been described in our previous works [21–24].

4. Case Study and Results

The case studies based on the regulation of RES according to market prices will demonstrate
the opportunity to reconsider the mandatory procurement component in the future. The example of
optimization is based on a real-life small-scale biogas power plant (CHPP) and a small hydropower
plant (SHPP). First of all, we maximize the income received by the producer of electricity from RES.
At the same time, indirectly, we reduce the influence of the MPC on the electricity market price [21].
The results based on the examples of a small CHPP and a small HPP prove the existence of the
problems and of ways of solving them. It is assumed that the cost characteristics remain the same
during the considered time horizon.

4.1. Biogas CHPP Description

The first example is based on the optimization of a real-life biogas CHPP to show the dependence
on the raw material used in the production of energy. We take into account that the total amount
of thermal and electrical energy produced depends on the type of biomass resource loaded into the
fermenter over a planning time horizon of one week [25–27].
The potential energy output Eb depends on the type and amount of raw material (m3 ) and
its calorific value (kWh/m3 ) [28]. In our case study, it is assumed that the biogas CHPP operates in
cogeneration regime. The input data for the considered small CHPP is provided in Table 1. The selected
time period depending on the biogas production peculiarities is 168 h. The biogas yield value is needed
to create the optimization model of the power plant. The production of electricity and heat depends
on the amount of biogas used, the efficiency of the gas turbine and the calorific value of the biogas.

Table 1. Main parameters of the power plant.

No. Parameter Value

1 Installed capacity (kW) 4911
4 Calorific value of the gas containing 55.8% of CH4 (kWh/m3 ) 6.16
5 Biogas yield (m3 /t) 90
6 Thermal efficiency coefficient 0.428
7 Electrical efficiency coefficient 0.406
8 Tanks 2
9 The amount of chicken manure used (t) 882
Energies 2017, 10, 800 8 of 12

The main criterion of our optimization problem is based on the restricted amount of
biomass used; it should be equal to the total input of chicken manure for fermentation for the whole
optimization period.

4.2. Small-Scale HPP Description

The second example shows the effect of the existing supporting schemes on the income received
and is based on an economic feasibility study for a SHPP and calculates the difference between the
income from fixed and market prices. We show the income computed by (1) and (2) and the net
present value (NPV). If the producer receives additional income, the growth of the NPV accelerates.
It is necessary to determine the rate of profit from the construction of the SHPP. The NPV calculation
time period is 20 years. During the first ten years, the generated energy is sold at a fixed price.
For the remaining ten years, it is sold at the market price.
The distinction from the already existing study lies in optimization, which is performed hourly
for each year; the producer is planning their regime by assuming the day-ahead market results.
The first case shows generation maximization according to a fixed price (the first ten years) and
after ten years, the energy is sold at the market price. The second case concerns generation planning
according to a market price schedule; NPV has been calculated for ten years with additional income
and in the remaining ten years, the market price is used.
The SHPP’s data are as follows: the plant has a dam as a water storage facility; SHPP construction
time: 1 year; the investments have been 1 × 106 €; reservoir area: 274,000 m2 ; nominal capacity: 300 kW;
dam water head: 7.9–8.2 m; water discharge through the turbine: 4.5 m3 /s; SHPP efficiency: 0.85.
To comply with the environmental restrictions during a two-week period, it is necessary to
optimize the water level in the first and the last hour and it equals 8 m. To achieve the objectives set in
this article, we assume a plant construction period of one year. The discount rate for Latvia’s economic
situation can be chosen as 7% for all the 20 years.
Thus, the optimization model takes into account the technical constraints and limitations of the
environment, such as: the installed capacity limits, the water levels in the reservoir, the decrease or
increase of the water level, the amount of water used, the ability to store water in the reservoir and the
peculiarities of the selected operating mode of the SHPP at the considered time interval.

4.3. Biogas Power Plant Optimization Results

In our optimization, it is considered that a certain minimal amount of thermal energy should
be provided by the power plant, which equals Qth = 250 kWh. An interruption of heat supply for
2–3 h leads to fluctuations of the permissible temperature because the inertia of heated spaces is used.
We use the parameters of the power plant given in Table 1. The linear programming method is used
for the optimization of the biogas CHPP.
During the hours when the electricity price is the highest, we produce the maximum amount
of electricity and thermal energy (Figure 4). In contrast, when the electricity price is low, we do not
utilize the whole resource of the biogas available and produce a minimum amount of electricity while
providing the thermal energy needed for maintenance. The uniform distribution of raw material for
the week ahead is presented in Figure 5. Biofuel is distributed uniformly despite the electricity price
schedule; such kind of CHPP regulation provides normal distribution from the maintenance point of
view but does not ensure maximum profit [29].
The electricity production from bio-resources is determined by the time required for the biomass
fermentation process, since production of biogas from chicken manure can take a week or longer.
Thus, the optimization process implementation needs to be extended from 24 h to a week or longer in
order to increase the quality of biomass distribution.
According to the results of the optimization considered for the week ahead (Figure 4), the income
from the sold energy is 16,005.89 €. If the bio-resource is uniformly distributed over the planning
horizon (Figure 5), it provides 15,040.37 €. However, when the producer distributes the raw material
Energies 2017, 10, 800 9 of 12

uniformly, the income decreases by 965.53 €. The distribution of biofuel according to the planned time
Energies 2017, 10, 800 9 of 13
schedule could
Energies 2017, provide
10, 800 more efficient use and an increase in the income. 9 of 13

Figure 4. Electrical and thermal energy production considering weekly distribution of chicken
Figure 4.4.Electrical
Figure Electricaland
and thermal
thermal energy
energy production
production considering
considering weeklyweekly distribution
distribution of manure.
of chicken chicken
manure.
manure.

Figure
Figure 5.
5. Electrical
Electrical and
and thermal
thermal energy
energy production
production according
according to
to the uniform distribution
the uniform distribution of
of chicken
chicken
Figure 5. Electrical and thermal energy production according to the uniform distribution of chicken
manure of 5.25 t/h.
manure of 5.25 t/h.
manure of 5.25 t/h.
The electricity
4.4. SHPP production
Feasibility Study from Market
Considering bio-resources
and Fixedis determined by the time required for the
The electricity production from bio-resources isPrices
determined by the time required for the
biomass fermentation process, since production of biogas from chicken manure can take a week or
biomass fermentation process, since production of for
biogas from chicken manurefeasibility
can take a week or
longer. Thus, the optimization process implementation needs to bethe
During this study, we have developed a model calculating economic
extended from 24 h to of a SHPP,
a week or
longer. Thus,
which sells the
electricaloptimization
energythe process
to the public implementation needs to be extended from 24 h to a week or
longer in order to increase quality of trader
biomass according to a fixed and/or market price. The technical
distribution.
longer
and in order
financial to increaseofthe
parameters thequality
project ofare
biomass
collecteddistribution.
and the water
According to the results of the optimization considered forinflow
the weekpredictions are performed.
ahead (Figure 4), the
When According to the results of the optimization considered for the week ahead (Figure 4), the
incomebuilding
from the relatively small plants,
sold energy the calculation
is 16,005.89 €. If the of NPV and IRR
bio-resource is is topical. Due
uniformly to this, theover
distributed present
the
income
article from
offers the
an sold
example energy
of is 16,005.89
calculating the €. If
expected the bio-resource
revenue based is
on uniformly
the developeddistributed
algorithm, over
as the
well
planning horizon (Figure 5), it provides 15,040.37 €. However, when the producer distributes the
planning
as horizon
thematerial
impact of that(Figure
revenue 5), it the
provides 15,040.37 €.plant
However, when the producer distributes the
raw uniformly, the on
incomereturn rate ofbythe
decreases 965.53 €.itself.
The The feasibility
distribution ofresults
biofuelare generalized
according to
raw
for material
the whole uniformly,
year to find the
the income
expected decreases
annual by 965.53
income; and €. The
the distribution
feasibility studyofisbiofuel
done according
for a period to
of
the planned time schedule could provide more efficient use and an increase in the income.
the planned
twenty years.time schedule could provide more efficient use and an increase in the income.
The generation
4.4. SHPP distribution
Feasibility Study example
Considering for and
Market a two-week period is presented in Figure 6. Obviously,
Fixed Prices
4.4. SHPP Feasibility Study Considering Market and Fixed Prices
we can see that the generation is stopped at hours of low prices The difference between the two NPVs
During this study, we have developed a model for calculating the economic feasibility of a
During this study, we have developed a model for calculating the economic feasibility of a
SHPP, which sells electrical energy to the public trader according to a fixed and/or market price. The
SHPP, which sells electrical energy to the public trader according to a fixed and/or market price. The
technical and financial parameters of the project are collected and the water inflow predictions are
technical and financial parameters of the project are collected and the water inflow predictions are
performed. When building relatively small plants, the calculation of NPV and IRR is topical. Due to
performed. When building relatively small plants, the calculation of NPV and IRR is topical. Due to
 this, the present article offers an example of calculating the expected revenue based on the
developed algorithm, as well as the impact of that revenue on the return rate of the plant itself. The
feasibility results are generalized for the whole year to find the expected annual income; and the
feasibility
Energies study
2017, 10, 800 is done for a period of twenty years. 10 of 12
The generation distribution example for a two-week period is presented in Figure 6. Obviously,
we can see that the generation is stopped at hours of low prices The difference between the two
(Figure
NPVs7)(Figure
at the 7)20th year
at the is suitable,
20th the firstthe
year is suitable, gained by the by
first gained fixed
theprice
fixed isprice
114,117 € and€the
is 114,117 andsecond
the
gained by market prices is significantly higher, namely, 241,079 €.
second gained by market prices is significantly higher, namely, 241,079 €.

Market price, 0,35

Power, MW 45
60 €/MWh 0,3 0,3 40

Generated power, MWh

55

Market price, €/MWh

0,25 0,25 35
50
30
45 0,2 0,2
25
40
0,15 0,15 20
35
15
30 0,1 0,1
10
25
0,05 0,05
20 hours
5
hours
15 0 0 0
1 5 9 13 17 21
0 20 40 60 80 100 120140 160 180 200 220240 260280300320 340
Generated power
Produced electric power Electricity market price Electricity price

(a) (b)
Figure 6. Energy production planning of small hydropower plant (a) according to market price for
Figure 6. Energy production planning of small hydropower plant (a) according to market price for
360 h and (b) selected production for 24 h.
360 h and (b) selected production for 24 h.

300
N PV(t ),
200 3
10 €
100
0
Y ea r
-100 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-200 1st case garanted support

-300
2nd case garanted support with an
-400 additional income
-500 90 NPV(t), 1 st case garan t ed sup p o rt

70 3
10 € 2 n d case garan t ed sup p o rt
-600
50 wit h an addit io n al in co m e
-700 30
-800 10 Year
-1 0
-900 7 8 9 10 11 12 13 14 15
-3 0
-1000
-5 0

Figure 7. 7.NPV
Figure NPVinintwo
twocases: (1) generated
cases: (1) generatedpower
poweraccording
according to to granted
granted supports
supports (IRR(IRR 1st = 9.96%);
1st = 9.96%); (2)
(2)generation
generationplanning
planningaccording
accordingtotothe
themarket
marketprice,
price,yet
yetwith
with all the energy sold at a fixed price,
all the energy sold at a fixed price, plus
plus
an an
additional income from the public trader (IRR
additional income from the public trader (IRR2nd = 11.82%).
2nd = 11.82%).

4.5.4.5.
The Influence
The ofofthe
Influence theCapacity
Capacityofofthe
theSHPP
SHPP Generators the Received
Generators on the ReceivedIncome
Income
AtAt
thethe differentsteps
different stepsofofpower
powerplant
plantdesigning,
designing, the
the main
mainpart
partisistotochoose
choosethe
thereservoir volume
reservoir volume
andand
thethe installed
installed capacityofofeach
capacity eachequipment
equipment unit.
unit. The
The influence
influenceof
ofthe
thechosen
chosengenerator
generator capacity onon
capacity
the received income will be shown below. The selection of a powerful generator could
the received income will be shown below. The selection of a powerful generator could provide flexibility provide
of production at maximum price hours. We considered generators with an installed capacity of 250 kW
(water discharge—4 m3 ), 300 kW (water discharge—4.5 m3 ) and 500 kW (water discharge—8 m3 ) to
find the influence of the capacity limitations. The three optimization results for 360 h show that the
summary-generated power for the whole period is the same and equals 87.41 MWh because of the
limited reservoir volume and its water level restrictions (the start and end point of water level for the
considered optimization period is 8 m). The income amount changes along with the selected generator
Energies 2017, 10, 800 11 of 12

capacities; for the 250 kW generator, the income is 2825.13 €; for the 300 kW generator, the income is
2970.18 € and the 500 kW generator could provide 3172.81 €. The 500 kW generator could produce
more electricity at the hours of the maximum price; however, in that case it discharges much more
water from the reservoir. The above-mentioned situation appears at the conditions when the operation
of the power plant is done according to the market price. In a real-life situation, the installed capacity
of the SHPP considered in the feasibility study equals 300 kW, but with this example, we show that it
is more effective to use 500 kW (in that case, the rate of return increases). Let us note that a similar
situation can be observed in the analysis of the efficiency of the biogas CHPP.

5. Conclusions
The formation of a coalition consisting of an energy trader and an operator of a power plant
ensures the interest in energy generation during the hours of its maximum demand and revenue
growth. The formation of a coalition does not contradict the interests of society. On the contrary, part of
the additional income can be used to reduce fees for the use of renewable energy. Using the proposed
approach reduces the payback period of projects and contributes to the selection of generators of
increased capacity.

Acknowledgments: The work presented in this paper has been co-financed by the National Research Program
LATENERGI (2014–2017).
Author Contributions: All authors contributed equally to this work. Renata Varfolomejeva has made introduction,
mathematical task statement and case study and results; Antans Sauhats has made introduction, mathematical
task statement; Nikita Sokolovs has made introduction and case study; Hasan Coban has made results of SHPP
feasibility study considering market and fixed prices.
Conflicts of Interest: The authors declare no conflict of interest.

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